As Millennials Discover the Stock Market, Compound Interest Enters the Picture

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Social media influencers are the gurus whom members of the Millennial Generation pay attention to; to a certain extent, we can compare them to the self-help experts and motivators who used to go on nationwide lecture tours. Haley Sacks, a young woman often referred to as Mrs. Dow Jones, has become the personal finance influencer of the Instagram generation, and she often makes it a point to mention compound interest when addressing her followers.

Millennials lag behind Generation X and Y

Sacks has everything we have come to expect from influencers: Stylish looks, sharp wit, and lots of charisma. She has been digitally providing financial advice since 2017, and Millennials have always been her target audience. When we look at stock market participation with a generational lens, it is easy to see that Millennials lag behind Generation X and Y; this is something that Sacks has certainly noticed, and she would like to see it change.

Millennials Investors Will Need to Learn to Use Compound Interest for Long-Term Gains

The GameStop and Robinhood trading debacles of 2021 have been on Sacks’s radar, and she is ambivalent about what she sees. On one hand, the David vs. Goliath story of individual investors undoing the short-selling scheme of a Wall Street hedge fun is pretty inspiring, particularly when you stop to consider that GameStop stores were childhood staples for many of these young traders. There is also the Robinhood angle to consider; here, we have a mobile app with the potential of introducing millions of young investors to the world of Wall Street.

These are the kind of investors who eventually discover they could have deposited their gains into a compound interest account for maximum earning potential

On the other hand, Sacks does not like the cavalier way in which some of her followers and peers have been tossing their money into the market. Many of them installed Robinhood and began trading GameStop options without bothering to establish an emergency funds account with at least three months of living expenses. Other young traders who came out ahead on their GameStop options adventure quickly spent their profits. These are the kind of investors who eventually discover they could have deposited their gains into a compound interest account for maximum earning potential.

If you are a young investor looking to get into stock trading, you should follow Sacks’ advice and start building your cash reserves now. At the same time, don’t forget to contribute to a compound interest account as much and as often as possible.

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